Federal Tax Disparities Affect Registered Domestic Partnerships in California
In California, registered domestic partnerships are treated similarly to married couples for state tax purposes, but significant disparities exist at the federal level. According to IRS Revenue Ruling 2013-17 and Regulation 301.7701-18(c), the federal government does not recognize registered domestic partnerships as marriages. This distinction affects how capital gains taxes are calculated when one partner dies. In community property states like California, both halves of jointly owned property can receive a step-up in value for state taxes, eliminating capital gains taxes on appreciation during the deceased partner's ownership. However, federally, only half of the property receives this step-up, potentially leading to higher taxable gains. Additionally, registered domestic partners are not eligible for certain federal benefits, such as Social Security spousal and survivor benefits, and have different rights regarding IRAs and employer retirement plans. 
